Question: Ganado - the same U.S.-based company as discussed in this chapter, has concluded a second larger sale of telecommunications equipment to Regency (U.K.). Total payment

Ganado - the same U.S.-based company as discussed in this chapter, has concluded a second larger sale of telecommunications equipment to Regency (U.K.). Total payment of £3,000,000 is due in 90 days. Maria Gonzalez has also learned that Ganado will only be able to borrow in the United Kingdom at 14% per annum (due to credit concerns of the British banks). Given the following exchange rates and interest rates, what transaction exposure hedge is now in Ganado's best interest?

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Assumptions Value 90day AR in pounds 300000000 Spot rate US per pound 17620 90day forward rate US per pound 17550 3month US dollar investment rate 600... View full answer

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